February 15, 2019

Duros Land under negotiation to partner with Chinese firm for Panglao hotel

NEWS
Duros Land Properties Inc. (DLPI) together with their prospective partner Hang Lü Group from Chongqing, China is developing a 3,000 sq m property near the recently inaugurated Bohol-Panglao International Airport. The property will soon give rise to a hotel that is up for completion in H1 2020. According to Rafaelito Barino, chairman of the Duros Group of Companies, the existing agreement between the two companies states that DLPI will build and offer to lease the entire space including hotel operations to Hang Lü Group. The hotel development which will serve as a condotel upon approval of the HLURB will be managed by DLPI’s sister company, Regent Property Management International Inc.

The newly inaugurated Bohol-Panglao International Airport should help boost Bohol’s leisure and retail sectors. We see developments near the airport, including the upcoming hotel by DLPI, capturing much of the consumer traffic due to improved accessibility. Hotels should also capture the increasing number of Korean and Chinese visitors in Central Visayas. We see tourist arrivals increasing due to the development of new airports in the region. Hence, property firms should consider developing properties near the airport that are feasible for hospitality projects.

Socialized housing compliance slows down LTS issuance

NEWS
Approved projects by the Housing and Land Use Regulatory Board (HLURB) 7 declined to 62 projects in 2018 from 83 in 2017. Out of the approved projects, 27 were subdivisions while 31 were condominiums. These subdivision projects covered of 5,763 house-and-lot units and 539 lot-only units while the condominium projects delivered a combined 3,071 units worth PHP10.610 billion. HLURB 7 Director Francis Ordineza mentioned that decline in approved projects was caused by the socialized housing compliance mandated under RA 110884. The high cost of raw lots in Metro Cebu made it difficult for developers to build their socialized housing projects. Ordineza expects the issuance of licenses to sell to be streamlined by the issuance of Memorandum Circular 09-2018 by HLURB which now allows developers to use an escrow account.

The new office supply expected to be completed in Cebu over the next two years should be complemented by the delivery of new residential projects. This should result in higher applications for socialized housing in order to comply with requirements under the RA 10884. Cost-sensitive developers that are constructing their socialized housing components should consider areas outside of Metro Cebu where lots are less expensive. Developable land near industrial parks like West Cebu Industrial Park, Cebu Light Industrial Park, and Mactan Economic Zone would also be feasible due to their proximity to their target market.

BPO sector eyeing high-value services

NEWS
Cebu is now expecting modest growth in its outsourcing sector as it starts to diversify into other non-voice services. According to Cebu IT BPM Organization (Cib.O) managing director Wilfredo Sa-a Jr, Cebu will start focusing on attracting higher value outsourcing services starting this year, including higher-paying jobs such as technology and knowledge-based services like engineers, insurance and finance, legal, health care, and research and development. The shift in sectors is caused by the apprehension of existing BPO locators and investors due to the US government’s anti-outsourcing stance and the uncertainties surrounding the implementation of the second package of the Tax Reform for Acceleration and Inclusion (TRAIN 2). Despite this, Sa-a believes that Cebu will eventually attract the attention of outsourcing investors outside of the United States due to Cebu’s improved ranking in the Tholon’s Super Cities survey. Cebu improved to 11th place in 2018, a notch higher than its ranking in 2017.

RESEARCH VIEW

The shift to higher value services will most likely impact the office sector due to the possible change in demand requirements. This demand should be absorbed by the office developments in Cebu city that are due for completion starting in 2019 such as One Montage, JEG tower, Skyrise4b, Grand Tower Cebu, The Space, and Latitude Corporate Center. The normal density ratio for BPOs is usually around five to six sq metres per person. Higher-value outsourcing jobs may need a larger density ratio to accommodate employees’ needs. Upcoming developments and office buildings that offer larger office cuts may benefit from this. We recommend buildings currently housing existing BPO locators to be more flexible in office space in case these companies start to diversify their services.